Microeconomics
Directions:
Using the Word template provided in the Minimum Submission Requirements, answer the following questions based on the situation.
Questions
1. The Gulf Sea Turtle Conservation Group (GSTCG), a non-profit group of volunteers working to collect data on nesting sea turtles and to promote sea turtle conservation, is considering creating a video to educate people about sea turtle conservation. The cost of duplicating the video on a DVD and mailing the DVD to anyone is $5.56. In a GSTCG member meeting, the video plan was discussed. The first two columns of Table 1 show the expected demand for the DVD at different suggested donation levels, and they can act as a single-price monopolist if they choose to. The receipts will be used to fund GSTCG supplies for their data collection and conservation work. At the end of each sea turtle nesting season, any excess funds are donated by the GSTCG to a local non-profit sea turtle research and rehabilitation facility.
a. Complete Table 1 by computing the Total Revenue, Marginal Revenue, Total Cost, and Profit columns, each rounded to two decimal places. The cost of duplicating a video on a DVD and mailing the DVD, the Marginal Cost, is $5.56. (1 point)
Table 1
Suggested Donation per DVD Request
Anticipated Number of DVD Requests
Total Revenue
Marginal Revenue
Total Cost
Profit
$19.00
0
$15.00
2
$9.50
4
$7.75
10
$3.00
15
$0.00
20
b. The president wants the GSTCG to provide videos to generate the most possible donations (Total Revenue). What price is the president of the GSTCG favoring and how many people will receive the DVD if this becomes the price of the suggested donation? Explain your answer.
c. The Education Outreach Committee wants the GSTCG to provide videos to the most possible number of people. What price is the Educational Outreach Committee favoring and how many people will receive the DVD if this becomes the price of the suggested donation? Explain your answer.
d. The treasurer of the GSTCG wants the DVD program to be as efficient as possible so that the marginal revenue equals marginal cost. What price is the treasurer favoring and how many people will receive the DVD if this becomes the price of the suggested donation? Explain your answer.
e. The Fundraising Committee wants the DVD program to generate as much profit in donations as possible. What price is the Fundraising Committee favoring and how many people will receive the DVD if this becomes the price of the suggested donation? Explain your answer.
2. Imagine an Island a short distance off the east coast of a country. This island is called Onus, and it has a population of about 500 residents. Their only way to the mainland is by the ONE ferry boat that runs between Onus and the mainland (the ferry operates as a monopoly).
Similarly, a short distance off the west coast of the same country is another island, Yuri, with a similar population of about 500 residents. Yuri, however, is a tourist attraction. There are MANY ferry boats running between Yuri and the mainland (each ferry operating in this perfectly competitive market). Each Yuri ferry operator provides service to both the tourists and to the 500 west coast island residents.
Using the information that you learned in Chapter 13 of the text, answer the following questions by comparing and contrasting the differences between the monopoly market in Onus and the perfectly competitive market in Yuri.
Explain in detail what differences in demand that the monopoly ferry operator on the east coast island of Onus will experience compared to the demand that a single ferry operator will experience in the perfectly competitive west coast market of Yuri.
Monopoly graph
Perfectly competitive market graph
Both the Onus ferry operator in the monopoly market and each of the Yuri ferry operators in the perfectly competitive market will want to produce at the point that the marginal revenue is equal to the marginal cost. Explain in detail the two reasons that the monopolys marginal revenue will always be less than its price while the marginal revenue in the perfectly competitive market will always be equal to the market price.
Monopoly graph
Perfectly competitive market with equilibrium equal to the firms lowest ATC graph
Explain in detail how the monopoly ferry operator will determine the quantity of ferry service that she will provide to the 500 residents of Onus. Also explain how that monopoly quantity will compare to the total quantity of ferry service available to the 500 residents of the perfectly competitive market of Yuri by ALL the Yuri ferry providers.
Monopoly with no government intervention graph
Perfectly competitive market with equilibrium equal to the firms lowest ATC graph
Explain in detail how the monopoly ferry operator in Onus will determine the price she will charge the island residents for ferry service and how that price will differ from the price experienced by the island residents and tourists in the perfectly competitive market of Yuri.
Monopoly with no government intervention graph
Perfectly competitive market with equilibrium equal to the firms lowest ATC graph
3. Onus residents, in questions 2.a.d. above, complain to their local politicians about the high prices. In an attempt to reduce the exorbitant price that the residents must pay for ferry service to and from the mainland, the local politicians convince the legislature to create a regulatory board which will impose a legal price ceiling on the Onus monopoly ferry operator.
In this scenario, the regulatory board imposed a price ceiling on the Onus monopoly ferry operator that was calculated to be below the ferry operators lowest ATC, but well above its lowest AVC. Explain in significant detail, what will be the short run and long run impacts of such a price ceiling on the Onus monopoly ferry operators profits and continued ability to provide service to the inhabitants of the island of Onus.
Monopoly where government price ceiling is set below lowest ATC but above lowest AVC graph
In this scenario, the regulatory board imposed a price ceiling on the Onus monopoly ferry operator that was calculated to be well above the ferry owners lowest AVC and equal to the ferry owners lowest ATC. Explain in significant detail, what will be the short run and long run impacts of such a price ceiling on the Onus monopoly ferry operators profits and continued ability to provide service to the inhabitants of the island of Onus.
Monopoly where government price ceiling is set below lowest ATC graph
In this scenario, the regulatory board, imposed a price ceiling on the Onus ferry operator that was calculated to be well above the ferry owners lowest AVC and well above the ferry owners lowest ATC. Explain in significant detail, what will be the short run and long run impacts of such a price ceiling on the Onus monopoly ferry operators profits and continued ability to provide service to the inhabitants of the east coast island of Onus.
Monopoly where government price ceiling is set below lowest ATC graph
4. Dr. Fine and Dr. Feelgood are the only two medical doctors offering immediate walk-in medical services in a small rural town. They operate in a two firm oligopoly. Each doctor can charge either a high price or a low price for a standard medical visit. Figure 1 shows their possible profits, based on each doctors pricing strategy.
Figure 1
Figure 1
a. Using the information in Question 4 and Figure 1 above, explain why the Nash Noncooperative Equilibrium pricing strategy is the safest choice when there is only a single period in which to choose a price and the likely actions of the competitor are unknown.
b. Using the information in Question 4 and Figure 1 above, complete the following table to depict the two period pricing situation when Dr. Fine always plays Tit-for-Tat and Dr. Feelgood always plays Tit-for-Tat.
FIRST Period
Payoffs
SECOND Period
Payoffs
TOTAL Payoffs
Charges
(high or low)
Charges
(high or low)
Fine
Fine
Feelgood
Feelgood
c. Using the information in Question 4 and Figure 1 above, complete the following table to depict the two period pricing situation when Dr. Feelgood always plays Tit-for-Tat and Dr. Fine always chooses the Low price.
FIRST Period
Payoffs
SECOND Period
Payoffs
TOTAL Payoffs
Charges
(high or low)
Charges
(high or low)
Fine
Fine
Feelgood
Feelgood
d. Using the information in Question 4 and Figure 1 above, complete the following table to depict the two period pricing situation when Dr. Feelgood always chooses the Low price and Dr. Fine always chooses the Low price.
FIRST Period
Payoffs
SECOND Period
Payoffs
TOTAL Payoffs
Charges
(high or low)
Charges
(high or low)
Fine
Fine
Feelgood
Feelgood
e. Using the information in Question 4 and Figure 1 above, complete the following table to depict the two period pricing situation when Dr. Fine always plays Tit-for-Tat and Dr. Feelgood always chooses the Low price.
FIRST Period
Payoffs
SECOND Period
Payoffs
TOTAL Payoffs
Charges
(high or low)
Charges
(high or low)
Fine
Fine
Feelgood
Feelgood
Minimum Submission Requirements
This Assessment should be submitted in this template.
Respond to the questions in a thorough manner, providing specific examples of concepts, topics, definitions, and other elements asked for in the questions. Your paper should be highly organized, logical, and focused.
Your paper must be written in Standard English and demonstrate exceptional content, organization, style, grammar, and mechanics.
Your paper should provide a clearly established and sustained viewpoint and purpose.
Your writing should be well ordered, logical and unified, as well as original and insightful.
A separate page at the end of your paper should contain a list of references, in APA format. Use your textbook, the Library, and the internet for research.
Be sure to cite both in-text and reference list citations were appropriate and reference all sources. Your sources and content should follow proper APA citation style. Review the APA formatting and citation style found in the Writing Center. The Writing Center can be found within the Academic Support Center under Academic Tools in the left navigation of your course. (It should be in Times New Roman 12-point font, include correct citations, Standard English with no spelling or punctuation errors, and correct references at the bottom of the last page.)
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